Although Analytical review procedures do not provide conclusive evidence, they have been found to be very useful for identifying possible errors or irregularities. Following are several independent situations which an auditor encounters during the audit of a client's financial statements:

a. A scan of the monthly sales summary prepared by the accounting department shows that the December 2022 sales are 30% higher than for December 2021.

b. Price competition in the client's industry during 2022 was very severe. Management was forced to make several budget cuts in both manufacturing costs and administrative expenses. However, the company's ratio of cost of goods sold to sales has increased, while the ratio of selling, administrative, and general expenses to sales has decreased.

c. The company obtained a large unsecured loan from its bank in 2022 to help cope with declining cash flows. The loan agreement requires the company to maintain a 2:1 working capital ratio at the end of each calendar quarter. A review of the monthly financial statements indicates that the company has complied with this requirement, although the ratio has fallen below the limit in some intervening months.

d. A review of the company's preliminary year-end financial statements prepared by the Controller shows that repairs and maintenance expenses have decreased from 10% of sales in 2021 to 5% in 2022.

e. In the past, the company has held substantial amounts of materials inventories on consignment from vendors. Management informed the auditor that these arrangements have been discontinued. However, the auditor's calculations of certain key financial ratios shows that inventory turnover has declined significantly in 2022 relative to previous years.

Required: For each of the above situations, describe the number of possible errors or irregularities that might have occurred in 2022 as follows:

a Describe 3.

b Describe 1.

c Describe 3.

d Describe 1.

e Describe 1.